The EcoCash heist

By Tendayi Mudhadha | 04 Jul 2020 at 20:09hrs
- A modern tale of irresponsible corporate behaviour

Sometime in 2013, I applied and became an Ecocash Agent (Agent), and immediately set shop in at least two locations within Harare CBD. The setup and running costs for me as an Agent were high, but the commission earnings were good, estimated at between 3-5% on volume of transactions.

At its launch on 29 September 2011, the Ecocash Launch Statement said the Mobile Money Service would  send money across all networks. Let me quote from the launch statement  released on this day:
"Unlike other mobile banking offerings that have emerged on the market, customers using EcoCash are not required to have a bank account, do not need to switch their SIM cards for new ones, and can move money across different mobile networks". Emphasis is mine

Let us remember this piece of very important information. For some time we could send money to numbers other than Econet subscribers, then it stopped.

What also was clear from the onset was that the charges for transacting on Ecocash were much higher compared to normal bank charges for similar transactions, more so for those not registered on the platform. The high charges were because of commissions that were shared by Ecocash and its Agents for offering the convenience, but way above normal bank charges. That principal-agent-commission relationship was later to grow into a hideous menace.

In a statement on 2 August 2013 Ecocash broke its undertaking  barely 2 years in, when it issued a statement that read in part:
"We regret that you will not be able to send money to Telecel mobile numbers using EcoCash as Telecel is not a valid Telecoms license holder."

This was soon followed by another, on 14 August 2013:
"Dear EcoCash Customer. Kindly note that you can only send money to Econet numbers until further notice. Any inconvenience caused is sincerely regretted."
To my recollection, this further notice never came.

Apparently there was a dispute about interconnectivity with other Mobile Network Operators ( MNOs) particularly Telecel; and Econet's indignation at what it perceived as unfair treatment in licence payment demands by the regulator, POTRAZ.  Apparently, POTRAZ was enforcing license payments by Econet (about $137m USD)  without so much as lifting a finger to push Telecel to pay their part. Econet started by throttling calls made from Econet terminating within Telecel before finally switching them off completely. The mobile money payments to citizens on the Telecel network were next to suffer, followed by a blanket ban by Econet on sending Ecocash payments to any number other than an Econet number.

The incidents and fracas with Telecel above, and wilful the disregard of the communicating and  transacting public's general convenience by abruptly terminating voice calls, messages and mobile money transfers to subscribers on other MNOs, deeply entrenched the belief and feeling commonly held amongst most citizens up to now that Econet Wireless are bullies. It used the general populace as pawns in its struggles against its competition and the establishment. Further than that, with self-righteous rage, it usurped the role of the regulator by unilaterally disconnecting an ‘unlicensed operator'. Watch out for this tendency of playing regulator when it suits Econet as this story unfolds.

On 29 January 2014, Telecel was to launch its second attempt at a mobile money wallet they called Telecash. Word in the market at that time was that they had 'poached' some of the best brains behind the Ecocash mobile wallet, and like any good competitor, they launched seeking to cover the bases that Ecocash had wilfully abandoned or neglected, such as cross-platform transacting. Interoperability with other financial platforms and cheaper charges were some of Telecash hallmarks. Further, they sought to piggy-back on the Ecocash Agents network that had grown tremendously by this stage.

In early 2014, I sought to expand my Agency business to include Telecash alongside my Ecocash business. It was quite clear that Telecash, though aggressive, would not catch up with Ecocash. Once I had applied for my Telecash agency and displayed their branding alongside that of Ecocash, I was to experience what I could only term bullying by Ecocash Agency  Account Managers. They visited my operation at the corner of Kwame Nkrumah and First Street and categorically told me off, that I could not do Telecash alongside Ecocash. I had to choose. I pointed out  my rental and staffing costs and they told me they didn't care, it was why they had targeted people who were already operating some other business. If Ecocash was my only business, it was my problem! (and unfortunately in an informal economy like Zimbabwe, maybe 1 in every 3 or so solely depended on this business opportunity otherwise well structured commission wise to be lucrative enough if you had good traffic volume and cash float). A report in the Chronicle of 20 February 2014 captioned "Ecocash Agents Slam Parent Firm" detailed the concerted operation to thwart the growth of Telecash among those who had become Ecocash Agents, ‘blackmailing' them. Ecocash would simply switch them off their platform until they got rid of all Telecash lines and paraphernalia. What the regulator POTRAZ thought of this behaviour, we could never find out, with this Goliath holding us by the throat.

My Agency Account Manager or his boss at that told me their logic, "We have invested a lot in mobilising the Agents network, we have spent money on free training and we cannot have some other network come and hitch a free ride." I was not convinced, I thought that was unfair competitive practices, like shutting out a challenger outside the ring rather than boxing them in the ring. When one boxer feels they own the ring, it is a recipe for disaster (the ring here was entrepreneurs who had accepted Econet Agency, thereby unwittingly selling their souls to a demanding deity). I remember I wrote a story then, a complaint, and sent it to the Sunday Mail. It was never published. So because I was making a bit of money on this agency business, I had to forgo the Telecash agency quite reluctantly. Telecash never quite took off for this and other reasons.

This is a perfect example of what I think is a serious blight on the Econet / Ecocash legacy: they refused any competition to have an opportunity to thrive. The world standard is that some competition is good for the consumers, and consequently in many countries there are antitrust laws to prevent monopolistic and unfair competitive practices. In the USA, "antitrust laws also referred to as competition laws, are statutes developed by the U.S. government to protect consumers from predatory business practices. They ensure that fair competition exists in an open-market economy." They see "free and unfettered competition" as the rule of trade. You would think a company like Econet that had to fight to break the monopoly of the then Posts and Telecommunications Corporation (PTC) would have know much better, as surely they had researched this matter in more detail than most in defending themselves at their birth. Or by defeating PTC they felt they had earned the right to be the new Mafia bosses in town, an all or nothing territorial game.

I will mention a third example of Econet's monopolistic tendencies I encountered elsewhere in corporate practice. At one point, I was working with a software development house who are integrators of content across all the mobile network operators. We would come up with bright ideas that naturally needed to ride on the back of mobile network(s) and it got to a stage when you would wait on Econet forever for them to give you an Application Programming Interface (API) or an Unstructured Supplementary Service Data(USSD) code to accomplish your concept. An API is a software intermediary that allows two applications to talk to each other, while USSD Code is a communications protocol used by cellphones to communicate with the MNO's computers. Econet are never content to share any piece of cake if they still have some space in their hippo stomach.

There is so much many would be young and corporate entrepreneurs would have loved to build on the successful Econet network but found Econet un-accommodative.  Rather, they have chosen to diversify into any conceivable related business or Value Added Service (VAS) that piggy backs on their MNO. Their attitude is, 'go on and get your own MNO!' Some have claimed they had their ideas stolen, such as Artwell Makumbe of the Sasai dispute, and  Ignatius Munengwa of Connected Home dispute. It is in the public domain. What I never understand is when you see such entrepreneurs pose as philanthropists; they would rather give you a fish than a fishing hook! Again, big business showcasing antitrust behaviour that takes advantage of absence of institutions that would investigate and possibly prosecute such behaviour. Keep an eye on this failure to behave responsibly by Econet when holding the upper ground, the advantaged position.

Having used all these examples to lay a foundation of what type of organisation we are dealing with, I want to proceed to characterise the Ecocash journey to the place where is has become a pariah wheeler dealer platform that has recently seen the authorities clamp down heavily on it. Let me say that when I first began to witness the clamping down, I was angry at the government and more specifically the regulatory authority, RBZ. But little by little I began to appreciate what they were doing, and rather than sympathise with a long term oppressive organization itself in Econet, I began to realise the measures being undertaken are for the overall and ultimate good of the consumer if they can be seen through. The government and regulatory authority could also take corrective measures to seal gaping loopholes, like availing enough cash for the transacting public.

For a good while, Ecocash Agents were reasonably well supervised and we were well aware we were doing a vital, responsible business that dealt with money. The Agents could be called to order at any time. One was supposed to write down transactions and these could be checked when so requested by Account Managers from Econet. For as long as money was available in the banks, this system worked, because it was all about moving money from one hand to the other. Mind you, it kicked in when there was the USD as primary currency in a mixed basket of currencies.

In the early part of 2016, a liquidity crunch began to unfold in Zimbabwe. The primary currency, the USD, simply was running out. You could not find it in the banks, and consequently the mobile money agents could not get any to facilitate their customer's cash outs.

In November 2016, the RBZ issued out bond notes to supplement the supply of USD on a 1:1 ratio. From the onset, the bond note was issued at a discount on the USD called the export incentive which was pegged at 5%. So from the beginning, the bond note and the USD were never 1:1 even in the mind of RBZ. Over time, the bond note was to depreciate further, to 10%, 20% and it kept on going.

As soon as the bond note began to depreciate against the USD, the Ecocash rate began to depreciate against both the USD and the bond notes. At first there was near parity in the depreciation but because the RBZ limited the availability of bond notes, their rate of depreciation against USD was slower than that of the Ecocash rate. Whatever money growth RBZ was trying to prevent by limiting bond notes, they did not work out a way to limit this money growth in the mobile wallets.
I have a gripe with our Economists right here, especially those in the RBZ. Mobile money is a new phenomenon that some gurus must have taken head on to research, study and understand its behaviour and impact on money supply, inflation etc. It is a whole PhD research topic. In fact, our Economists are so lazy as to have even bothered to research on upcoming transacting trends such as blockchain and cryptocurrencies; but just banning them out of hand, with the RBZ Governor famously embarrassing himself in September 2018 on foreign soil on an international television channel by claiming that RTGS balances were a form of cryptocurrency.

Another interesting phenomenon began. Because Agents could no longer access cash from the bank, many ceased their operations. Others were a bit more resourceful, and discovered that you could access bond notes and coins at a premium against the Ecocash mobile wallet money, and allow customers to Cash-Out at an even higher premium. This was purely the invention of the Agents because in October 2017 Ecocash issued a threat for Agents to stop abusing their Agency, in concert with Minister of Finance and RBZ. Agents were by now demanding a premium of about 40% on bond notes on Cash-Outs. It is interesting to note that this notable spike of abuse of the Ecocash platform happened immediately before the events of November 2017.
But before we crucify Econet, we must first deal with their equally guilty accomplices in raping the masses of their hard-earned incomes. First and foremost, RBZ and Finance Minister. How on earth they could not, and still cannot avail notes sufficient to meet the needs of the transacting public, overwhelms my mind. I need those Economists to lay it out very clearly, how they are helping me by making me lose up to 50 or 60% of my money's value because they simply won't avail enough cash for my balance in my bank? Workers and pensioners began to sleep on bank queues, and still do today, to access meagre amounts of cash. I hear it has something to do with limiting money supply growth which would lead to hyperinflation. I and most of my countrymen are not convinced about that, because what they did not want to happen to the bond note, was happening to the Ecocash-Dollar. By this time we had three distinct currencies: USD and other forex, bond notes later to be re-christened RTGS-dollar in 2019 and the Ecocash-Dollar. We still have these monstrous apparitions with us as I write. This is purely the failing of RBZ since the Jongwe First Republic to this Lacoste Second Republic. My view is that, of all Finance Ministers, the current one has been given the longest, straightest rope but he has just made a mangle of it. If he had some self respect, he should simply resign.

Next up on my burner are the manufacturers and other wholesalers and traders. At some point before the spike of premiums of Ecocash Cash-Out rates,  these began to offer cash discounts for anyone who would buy with bond notes and in some cases flatly refused other forms of payment. The percentage discounts kept growing, and as they did, Cash-Out premiums steadily grew. Manufacturers most likely did this to slip some transactions under the tax man's radar. Strangely, I never heard of a raid on such manufacturers or traders and their being penalised for literally demanding cash payments like they were selling narcotics. There are manufacturers, traders and shops like these that demand only cash, even as I write. Well, now they demand only USD, nothing else. Go to all that area along Rezende Street, Leopold Takawira and explain to me what on earth is happening? Without these traders' behaviour, the premium on Ecocash-Dollar against Bond Cash or RTGS dollars would not have gone out of hand.

Finally Econet in the dock. Their crime is that they saw their creation Ecocash turning into a monster. Instead of killing it, they took it inside and began to feed it behind closed doors. When cash ran out in Zimbabwe, Ecocash should have closed, at least the Agency network. From that point forward, they knew pretty well that whatever their agents were doing was illegal and against their very clear policies, for example of not charging fees or commissions outside the system. Ecocash Agents were asking and receiving commissions in excess of 50% of the transacted value at the peak. So it meant that if a customer approached an agent and needed $100 Bond or RTGS dollars, they would do a cash-out transaction of $150 on the mobile wallet. That was a terrible loss of value, and a terrible indictment on both RBZ and Econet for fostering an environment that permitted such pillaging. You would think that was terrible enough but worse was to come.

Ecocash Agents began to use their Agent lines to do Cash-Ins that never existed facilitating the black market foreign currency trade. An Agent would, for example, put $50,000 onto the agent line via the Econet Mobile Money Trust Account (MMT). This would be money belonging to a ‘client' who wants USD. Assuming the black market rate is USD$1 to RTGS$50, that money would be parcelled out to individuals who would bring various small packets of USD to the Ecocash Agent, who would pay them using the Cash-In function. They get a RTGS credit and leave their USD.  The Agent would have quoted the client say a rate of USD$1 to RTGS$55. The Agent pockets RTGS $5000 or USD$100. Quite a handsome profit, but not only for him or her, but for Ecocash who would earn commission, together with the Agent, on the small split Cash-In transactions. This was well ultra vires the expectation of why the mobile money wallets were established and how they were to operate. The amounts of transactions they saw happening were clearly and blatantly suspicious but they chose to turn a blind eye.

A final allegation I want to address was that they were advancing ghost balances to Ecocash Agents. The Agents would use the huge advances or overdrafts to buy USD as described above, perhaps to be shared by Econet. Let me state my belief that for all their shortcomings, this would be a step too far even for them, and I doubt if there could be any truth in that. I can clearly see how from a system perspective that could happen, how balances could be created out of thin air for Agents but I would be surprised if that happened at all. If it did, big prison terms would be in order for the perpetrators. It  would be open fraud.

So I expect Ecocash to be bullish about this issue and go to court, but they would be approaching the court with very dirty hands. Remember the bully label from earlier on, where in their self-righteous indignation they would alternately play the aggrieved party and the regulator. My simple question would be, the RBZ may have failed to monitor you EWZ, why did you not self-regulate? You boasted of having built and maintained a large network of Agents, if they went rogue without you being complicit, why did you not reign them in? Loss of revenue? It only needed the running of a simple program to check transactions on an agent line and flag it for suspicious transactions, many were not even performed in close proximity as would be expected in a proper Cash-In transaction which are supposed to be done in person, but were usually several kilometres or towns apart. This could easily be established by checking the base stations of initiating and terminating handsets; and us your agents know you have this capability.

So I moved from thinking RBZ was being hard on Econet, to thinking they were being hard on the transacting public to thinking, but this is the right thing to do. Closing the Econet Agency network was long overdue. They should have been used only as a marketing tool at the launch and soon afterwards disbanded. Ecocash balances should just move between people after being initiated in a bank and terminated by wallet to bank account transfer, in a fully interoperable transacting environment. I have a reason to think so.

Ecocash-dollar was always related to real balances of money via a very high commission tariff meant to sustain the Agency holder. That immediately meant the two currencies were never the same, to the detriment of the income earner. In the same way that the bond note created a 5% incentive for people to exchange their USD for the bond note while claiming it was at par, that 5% incentive told a different story. Ecocash commissions when you combined cash-in and cash-out ranged about 3-8% over its lifecycle. As in the case of any quasi currency like the bond note, the Ecocash Dollar became a quasi currency and as soon as a reason or opportunity arose (such as the liquidity challenge) for someone to demand a higher commission, they did, seeing the rise to current highs of over 50% on the RTGS dollar.

It is now my considered viewpoint that the Agency holder is an unnecessary rent-seeker. We want the value of our mobile wallets balances to be the same as cash we may have in the pockets or the balances in our bank accounts, with absolutely no room for arbitrage. This must be the policy target by RBZ and the Minister of Finance. That way a country's money retains its integrity. A bank must host the wallet and charge the wallet owner / account owner bank charges at the end of a period. If the different modes of money are ubiquitous, changing it from one form to another must be the mere issue of a small bank charge which is never a big dent one can feel. For example, moving money from one's bank account to Ecocash and vice-versa, a very small negligible charge is levied. The same relationship must exist for moving one's Ecocash balance to cash and vice-versa. When we ask someone to change $100 we never expect them to give us ten $10 notes plus a $5 note commission.

Changing money to any mode must not be a transaction that creates wealth for any third party, yet in Zimbabwe people make livelihoods out of trading money for different forms of the same money, all legal tender in the same country: ZWL bond, ZWL Cash and ZWL Ecocash. This has to be seen for the wrong that it is, many people's earnings have been devalued by such shenanigans. Ecocash with accomplices has led the heist. Putting the agent lines out of business forever closes an obvious loophole that has unjustly enriched a few while impoverishing the masses. On the other hand, RBZ must print enough money and not try to artificially manage the money supply at the expense of the same citizens they claim to be protecting from we don't know what.



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